Exhibit 99.1
ITT Industries Announces Third Quarter EPS of $1.16 on Strong Organic Revenue
Growth
- Organic revenue up 12 percent; fourth consecutive quarter of
double-digit organic growth
- Orders up 25 percent during the third quarter, with increases across
all businesses
- Segment Operating Income up 23 percent to $188 million
- Company sees full-year 2004 EPS at top end of $4.45 - $4.50 range
WHITE PLAINS, N.Y., Oct. 21 /PRNewswire-FirstCall/ -- ITT Industries, Inc.
(NYSE: ITT) today announced third quarter 2004 net income of $109.8 million,
even with the period last year, and up 21 percent when excluding the net
benefit of special items recorded in the third quarter 2003. Diluted earnings
per share (EPS) for the quarter was $1.16. Third quarter revenue was $1.67
billion, up 21 percent due to increased sales in all business units, the
completion of recent acquisitions and the positive impact of foreign currency
translation. Segment operating income rose 23 percent to $188 million on
higher volume and improved efficiencies in all segments.
"Our strong third quarter is reflective of the momentum we've seen
throughout the year, extending our track record of double-digit growth in
operating income and revenue," said Steve Loranger, President and Chief
Executive Officer of ITT Industries. "This marks the fourth consecutive
quarter we've recorded double-digit organic growth in our core business
portfolio. Revenue growth continues in the Defense business, with innovative
new products and technical services meeting the priorities of our primary
customers; we are beginning to see synergy sales effects with the addition of
our recently acquired Remote Sensing business. The water and wastewater
businesses of our Fluid Technology segment continue to perform well with
substantial water treatment contract wins and robust order activity. The
Electronic Components business continues to grow revenues, streamline its
operations and grow market share through new product introductions, and our
Motion & Flow Control businesses are finding success through new product
introductions and extending existing products into new markets."
"Across the company, we saw our best order activity of the year, and
coupled with our robust performance, we are confident that we will realize
full year EPS at the top end of the $4.45- $4.50 range."
Third Quarter Financial Highlights
-- Third quarter 2004 revenues rose 21 percent to $1.67 billion, fueled by
organic sales increases in all four segments, acquisitions and the
positive impact of foreign currency translation. Organic revenue,
which excludes the impact of foreign exchange and acquisitions, grew 12
percent, marking the fourth consecutive quarter the company has
registered double-digit organic revenue growth.
-- Segment operating income grew 23 percent over the third quarter 2003 to
$188 million on higher volume and operational improvements.
-- The company's 2004 year-to-date cash from operations was $249.6
million, off $19.6 million from the first nine months of 2003, due
primarily to an increased investment in working capital as a result of
higher revenues. Continuing improvement in working capital and
planned fourth quarter sales levels are expected to yield the company's
full year 2004 cash targets.
-- The company completed its acquisition of the Remote Sensing Systems
(RSS) business of Kodak, combining it with its existing space imaging
businesses to create the Space Systems division, a full-spectrum
satellite payload provider with the latest visible and infrared
satellite imaging technology to serve the $6 billion remote sensing
market.
Third Quarter Segment Highlights
Fluid Technology
-- Third quarter 2004 Fluid Technology revenues were $619.2 million, up
$55.1 million or 10 percent from the third quarter 2003, driven by
higher sales in the Water Technology and Fluid Handling units, recent
acquisitions and the positive impact of foreign currency translation.
Segment operating income was $77 million, and margins declined 80 basis
points, with operational improvements more than offset by the impact of
foreign exchange transactions, acquisitions and restructuring expenses.
-- Order activity strengthened within the water and wastewater businesses
of Fluid Technology, with orders in the Advanced Water Treatment group
up more than 200 percent. The group has seen success from its market
expansion strategy with a significant contract to design, supply and
build an industry-leading energy efficient reverse osmosis desalination
plant in the Middle East, providing 30 million gallons of drinking
water per day. The plant is due to begin operations by early 2006.
-- The Industrial Products group saw a significant increase in orders for
replacement parts. The group is also benefiting from an increase in
mining activity. The company was awarded a $3 million mining order for
high alloy vertical turbines in South America.
Defense Electronics & Services
-- Defense Electronics & Services revenues for the third quarter were
$630.2 million, up $184.3 million or 41 percent, due to stronger sales
in nearly all of the divisions in the Defense segment and the
acquisition of RSS. Excluding the impact of the acquisition, revenues
rose 30 percent. Operating income rose $23.7 million or 49 percent to
$71.8 million, and operating margin grew 60 basis points.
-- Orders in Defense rose 41 percent, and grew 37 percent excluding the
impact of the RSS acquisition. With orders from the Space Systems
division and additional contracts won during the quarter, the Defense
backlog now stands at a record $3.3 billion.
-- The company continues its heritage of providing payloads for all of the
U.S. weather satellites. In September the company won a $359 million
contract to develop, manufacture and test an advanced imager for the
next generation of geostationary weather satellites operated and funded
by the National Oceanic and Atmospheric Administration (NOAA).
-- The Space Systems division field tested and introduced Airborne Natural
Gas Emission Lidar (ANGEL) that will allow natural gas pipeline
monitoring that is 100 times faster and provides 30 times more right-
of-way survey coverage than traditional inspection methods. ANGEL
technology has applications with pipelines carrying a broad array of
hydrocarbons, and is expected to be commercially available in 2005.
Motion & Flow Control
-- Motion & Flow Control revenues for the third quarter were $242.8
million, up $19.8 million or 9 percent on higher volume in the Motion
Control and Leisure Marine businesses and the positive impact of
foreign currency translation. Organic revenue growth was 4 percent,
due to strong sales in the spa/whirlpool and friction materials
businesses. Operating income was up 12 percent to $32 million, and
operating margin increased 30 basis points, with operational
improvements offset by an increase in raw materials costs and
restructuring expenses.
-- The company's fluid handling business is successfully extending its
product lines to new regions and new applications. It has begun
bidding on automotive opportunities in China, seeking greater
participation in global production platforms. The unit's Quick Connect
technology is now found on nearly 200 plumbing-related products with
Moen, and it booked its first computer cooling contract in the third
quarter.
-- ITT's friction materials business continues to grow market share
through new platform wins, primarily in Europe, winning contracts with
original equipment manufacturers such as Audi, Porsche, Volkswagen and
BMW.
Electronic Components
-- Electronic Components third quarter revenues rose $34.3 million or 24
percent to $178.1 million. Organic revenue grew 20 percent in the
quarter, on strong growth in communication, transportation and
military/aerospace.
-- Orders were up 15 percent, primarily in the transportation, industrial
and commercial aerospace markets. Operating income rose $5.7 million
to $7.2 million with a corresponding 300 basis point increase in
operating margin. Excluding the impact of restructuring, operating
income grew $6.6 million to $8.3 million, and operating margin
increased 350 basis points.
-- The company is executing its strategy to streamline operations,
increase global sourcing and to target its resources to high technology
applications. As part of its plan to reduce its exposure to low
volume, high mix product lines, the company expects to discontinue the
manufacture of approximately 1,000 part numbers related to the keypad
business between mid-2004 and the end of the first quarter 2005.
-- Electronic Components management is taking steps to focus on higher-
margin end markets. In the third quarter, the company initiated a
strategic review of its non-core Network Systems & Services (NS&S)
business, which provides high-speed cabling and harnesses for building
applications.
About ITT Industries
ITT Industries, Inc. (http://www.itt.com ) supplies advanced technology
products and services in key markets including: electronic interconnects and
switches; defense communication, opto-electronics, information technology and
services; fluid and water management and other specialty products.
Headquartered in White Plains, NY, the company generated $5.63 billion in 2003
sales.
In addition to the New York Stock Exchange, ITT Industries stock is traded
on the Midwest, Pacific, London, Paris and Frankfurt exchanges.
Certain material presented herein consists of forward-looking statements
which involve known and unknown risks, uncertainties and other important
factors that could cause actual results to differ materially from those
expressed in, or implied from, such forward-looking statements. Such factors
include general economic conditions, foreign currency exchange rates,
competition and other factors all as more thoroughly set forth in Item 1.
Business and Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Forward-Looking Statements in the ITT
Industries, Inc. Form 10-K Annual Report for the fiscal year ended December
31, 2003, and other of its filings with the Securities and Exchange
Commission.
NOTE: ITT Industries believes that investors' understanding of the
company's operating performance is enhanced by the use of certain non-GAAP
financial measures, including adjusted GAAP net income and adjusted GAAP EPS,
which Management considers useful in providing insight into operating
performance, as it excludes the impact of special items that cannot be
expected to recur on a quarterly basis. Management also believes that
investors can better analyze the company's revenue growth by utilizing an
organic revenue growth measure that excludes the effect of foreign exchange
translation and the effect of recent acquisitions. In addition, Management
considers the use of free cash flow to be an important indication of the
company's ability to make acquisitions, fund pension obligations, buy back
outstanding shares and service debt. Free cash flow, adjusted net income,
adjusted EPS and organic revenue are not financial measures under GAAP, should
not be considered as substitutes for cash from operating activities, EPS, net
income or revenue as defined by GAAP, and may not be comparable to similarly
titled measures reported by other companies. A reconciliation to the GAAP
equivalents of these non-GAAP measures is set forth in the attached unaudited
financial information.
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(In millions, except per share)
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
Sales and revenues $1,667.7 $1,375.2 $4,836.1 $4,109.8
Costs of sales and revenues 1,100.9 903.7 3,187.0 2,699.7
Selling, general and 244.6 195.9 712.4 594.8
administrative expenses
Research, development and
engineering expenses 150.4 137.2 462.0 409.4
Restructuring and asset 5.7 1.6 24.7 17.9
impairment charges
Total costs and expenses 1,501.6 1,238.4 4,386.1 3,721.8
Operating income 166.1 136.8 450.0 388.0
Interest expense (income), net 8.6 (5.3) 15.1 (14.6)
Miscellaneous expense 4.1 2.0 10.8 4.8
Income from continuing
operations before 153.4 140.1 424.1 397.8
income taxes
Income tax expense 43.9 37.6 113.8 116.5
Income from continuing 109.5 102.5 310.3 281.3
operations
Discontinued operations,
including tax income /(exp)
of $(0.1), $6.3, $(0.2) and
$6.1 in each period,
respectively 0.3 6.7 0.4 14.5
Net income $109.8 $109.2 $310.7 $295.8
Earnings Per Share:
Income from continuing
operations:
Basic $1.19 $1.11 $3.36 $3.06
Diluted $1.16 $1.09 $3.29 $2.99
Discontinued operations:
Basic $ - $0.07 $ - $0.15
Diluted $ - $0.07 $ - $0.15
Net income:
Basic $1.19 $1.18 $3.36 $3.21
Diluted $1.16 $1.16 $3.29 $3.14
Average Common Shares - Basic 92.3 92.3 92.3 92.1
Average Common Shares - Diluted 94.3 94.3 94.4 94.0
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
September 30, December 31,
2004 2003
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $253.9 $414.2
Receivables, net 1,249.0 974.6
Inventories, net 654.1 578.5
Deferred income taxes 71.9 68.2
Other current assets 84.2 70.0
Total current assets 2,313.1 2,105.5
Plant, property and equipment, net 923.5 893.3
Deferred income taxes 366.2 373.3
Goodwill, net 2,425.1 1,629.1
Other intangible assets, net 275.1 74.8
Other assets 932.4 861.6
Total assets $7,235.4 $5,937.6
Liabilities and Shareholders'
Equity
Current Liabilities:
Accounts payable $713.4 $635.3
Accrued expenses 698.7 653.4
Accrued taxes 294.1 251.9
Notes payable and current 1,019.5 141.5
maturities of long-term debt
Other current liabilities 3.1 4.5
Total current liabilities 2,728.8 1,686.6
Pension and postretirement benefits 1,524.4 1,403.8
Long-term debt 442.9 460.9
Other liabilities 502.1 538.6
Total liabilities 5,198.2 4,089.9
Shareholders' equity 2,037.2 1,847.7
Total liabilities and shareholders' equity $7,235.4 $5,937.6
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months Ended
September 30,
2004 2003
Operating Activities
Net income $310.7 $295.8
Income from discontinued operations (0.4) (14.5)
Income from continuing operations 310.3 281.3
Adjustments to income from
continuing operations:
Depreciation and amortization 146.0 138.7
Restructuring and asset impairment charges 24.7 17.9
Payments for restructuring (24.3) (14.9)
Change in receivables (142.4) (147.6)
Change in inventories (51.5) (14.6)
Change in accounts payable and accrued expenses 56.2 26.6
Change in accrued and deferred 59.8 172.1
taxes
Change in other current and non- (94.3) (191.6)
current assets
Change in other non-current (44.3) (7.0)
liabilities
Other, net 9.4 8.3
Net cash - operating activities 249.6 269.2
Investing Activities
Additions to plant, property and (100.2) (97.0)
equipment
Acquisitions, net of cash acquired (994.6) (44.1)
Proceeds from sale of assets and businesses 5.1 9.3
Sale of Investments - 43.5
Other, net 0.2 0.1
Net cash - investing activities (1,089.5) (88.2)
Financing Activities
Short-term debt, net 855.5 (12.0)
Long-term debt repaid (52.1) (40.3)
Long-term debt issued 1.1 0.3
Repurchase of common stock (131.5) (32.2)
Proceeds from issuance of common stock 61.5 27.9
Dividends paid (46.1) (43.2)
Other - 0.2
Net cash - financing activities 688.4 (99.3)
Exchange Rate Effects on Cash
and Cash Equivalents (3.6) 12.3
Net Cash - Discontinued Operations (5.2) 16.1
Net change in cash and cash equivalents (160.3) 110.1
Cash and cash equivalents - beginning of year 414.2 202.2
Cash and Cash Equivalents - end of period $253.9 $312.3
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Organic Revenue / Orders Growth
Third Quarter 2004 & 2003
($ Millions)
(As Reported - GAAP)
Sales & Sales & %
Revenues Revenues Change Change
2004 vs. 2004 vs.
3M 2004 3M 2003 2003 2003
ITT Industries - Consolidated 1,667.7 1,375.2 292.5 21%
Defense Electronics & Services 630.2 445.9 184.3 41%
Electronic Components 178.1 143.8 34.3 24%
Motion & Flow Control 242.8 223.0 19.8 9%
%
Orders Orders Change Change
3M 2004 3M 2003 2004 vs. 2004 vs.
2003 2003
Defense Electronics & Services 588.0 417.7 170.3 41%
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Organic Revenue / Orders Growth
Third Quarter 2004 & 2003
($ Millions)
(As Adjusted - Organic)
Acquisi-
tion FX Adj. %
Sales & Contri- Contri- Sales & Sales & Change Change
Revenues bution bution Revenues Revenues Adj. Adj.
3M 3M 3M 3M 3M 04 04
2004 2004 2004 2004 2003 vs. vs.
03 03
ITT Industries -
Consolidated 1,667.7 (82.3) (39.0) 1,546.4 1,375.2 171.2 12%
Defense Electronics
& Services 630.2 (48.6) 0.0 581.6 445.9 135.7 30%
Electronic
Components 178.1 0.0 (6.2) 171.9 143.8 28.1 20%
Motion & Flow
Control 242.8 (0.8) (10.3) 231.7 223.0 8.7 4%
Acquisi-
tion FX %
Contri- Contri- Adj. Change Change
Orders bution bution Orders Orders Adj. Adj.
3M 3M 3M 3M 3M 04 04
2004 2004 2004 2004 2003 vs. vs.
03 03
Defense Electronics
& Services 588.0 (15.9) 0.0 572.1 417.7 154.4 37%
ITT Industries Non-GAAP Press Release Reconciliation
Segment Operating Income & OI Margin Adjusted for Restructuring
Third Quarter of 2004 & 2003
($ Millions)
Adjust
Q3 2004 Q3 2003 % Q3 2004 for Q3 2004
As As Change As 2004 As
Reported Reported 04 vs. Reported Restruct- Adjusted
03 uring
Sales and Revenues:
Electronic Components 178.1 143.8 178.1 178.1
Operating Margin:
Electronic Components 4.0% 1.0% 4.0% 4.7%
Income:
Electronic Components 7.2 1.5 380.0% 7.2 1.1 8.3
ITT Industries Non-GAAP Press Release Reconciliation
Segment Operating Income & OI Margin Adjusted for Restructuring
Third Quarter of 2004 & 2003
($ Millions)
Adjust
Q3 2003 for Q3 2003 %
As 2003 As Change Change
Reported Restruct- Adjusted Adj. 04 Adj. 04
uring vs. 03 vs. 03
Sales and Revenues:
Electronic Components 143.8 143.8
Operating Margin:
Electronic Components 1.0% 1.2% 350.0 BP
Income:
Electronic Components 1.5 0.2 1.7 6.6 388.2%
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
Third Quarter of 2004 & 2003
($ Millions, except EPS and shares)
Q3 2004 Q3 2004 Q3 2004
As Reported Adjustments As Adjusted
Segment Operating Income 188.0 5.8 193.8
Interest Income (Expense) (8.6) - (8.6)
Other Income (Expense) (4.1) - (4.1)
Corporate (Expense) (21.9) (0.1) (22.0)
Income from Continuing Operations
before Tax 153.4 5.7 #A 159.1
Income Tax Items (3.7)#B (3.7)
Income Tax Expense (43.9) (1.8)#C (45.7)
Total Tax Expense (43.9) (5.5) (49.4)
Income from Continuing Operations 109.5 0.2 109.7
Income from Discontinued Operations 0.3 (0.3)#D 0.0
Net Income 109.8 (0.1) 109.7
Diluted EPS 1.16 (0.00) 1.16
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
Third Quarter of 2004 & 2003
($ Millions, except EPS and shares)
Change % Change
2004 vs. 2004 vs.
Q3 2003 Q3 2003 Q3 2003 2003 2003
As Adjust- As As As
Reported ments Adjusted Adjusted Adjusted
Segment Operating Income 152.6 1.6 #E 154.2
Interest Income (Expense) 5.3 (10.2)#F (4.9)
Other Income (Expense) (2.0) - (2.0)
Corporate (Expense) (15.8) - (15.8)
Income from Continuing
Operations before Tax 140.1 (8.6) 131.5
Income Tax Items (5.9) (5.9)
Income Tax Expense (37.6) 2.7 #G (34.9)
Total Tax Expense (37.6) (3.2) (40.8)
Income from Continuing
Operations 102.5 (11.8) 90.7
Income from Discontinued
Operations 6.7 (6.7)#H 0.0
Net Income 109.2 (18.5) 90.7 19.0 21%
Diluted EPS 1.16 (0.20) 0.96 $0.20 21%
#A - Remove Restructuring Expense of $5.7M
#B - Remove Effect of Favorable Tax Items ($3.7M)
#C - Tax Effect of Adjustments #A
#D - Remove D.O. Income of $0.3M
#E - Remove Segment Restructuring Expense of $1.6M
#F - Remove Interest Income From Tax Audit Settlement
#G - Tax Effect of Adjustments #E and #F
#H - Remove D.O. Income of ($6.7M)
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
Full Year of 2004 & 2003
Full Year 2004 EPS**
Full Year
Lower Limit Upper Limit 2003 EPS**
As Reported* 4.48 4.53 4.29
Adjustments
Restructuring 0.18 0.18 0.22
Interest (0.03) (0.03) (0.16)
Tax Settlement (0.19) (0.19) (0.35)
Other - Debt Repayment 0.01 0.01
Discontinued Operations 0.00 0.00 (0.14)
Adjusted Net Income 4.45 4.50 3.86
* Amount represents projected figures for full year 2004
** Represents diluted EPS
SOURCE ITT Industries, Inc.
-0- 10/21/2004
/CONTACT: Tom Glover of ITT Industries, +1-914-641-2160,
tom.glover@itt.com/
/Web site: http://www.itt.com /
(ITT)
CO: ITT Industries, Inc.
ST: New York
IN: ARO CPR
SU: ERN